Fixed Term Annuities

Making a decision on which annuity is right for you can often be a challenging and somewhat confusing task. For many people, it’s a stressful decision that can have a major impact on their income for the rest of their lives and therefore making the right decision is really important. There are a number of different annuity options available on the market, but for people who are looking for security and stability, fixed term annuities can prove to be a popular choice.

What is a fixed term annuity?

Fixed term annuities are exactly what their names says – annuities which are fixed for a certain amount of time, in most situations this is either five or ten years. Fixed term annuities ensure that you receive a certain amount of income over a certain period of time and they are a way of guaranteeing you an annuity over that period.

Who might select a fixed term annuity?

Anyone who is looking for a bit of stability in their annuity purchase may consider taking out a fixed term annuity. This specific investment is not reliant upon the market and therefore won’t deviate as many of your other investments could. Fixed term annuities also offer a level of income security to your beneficiaries, meaning that if you were to die unexpectedly before you had finished your annuity guarantee period, your remaining income could be paid to your beneficiaries, minus tax.

What are some benefits of a fixed term annuity?

Fixed term annuities provide you with a guaranteed income, and each month you know exactly how much you are going to receive which can give you peace of mind and some level of financial stability. Although your income might not be quite as high as someone who is on a variable annuity, in the current often volatile economic it can be a way of ensuring that you receive a reasonable and secure annuity income.

What are some disadvantages of a fixed term annuity?

One of the main problems associated with a fixed term annuity is that in some cases the return rate can be a lot lower than that of a traditional annuity. Most annuities move with market fluctuations and therefore can go up or down depending on the current economic situation. This could generate a higher income for someone who chooses to go with a flexible annuity.

About the author:

Paul is a freelance pension advisor from the UK working with The Annuity Specialist